‘Robust’ results at Morrisons despite ‘more testing’ trading period
Bradford-headquartered Morrisons has seen pre-tax profits and revenues rise in a “more testing” continually competitive retail market and weak consumer confidence.
The listed Big Four supermarket this morning published its interim results for the six month period ended 4 August 2019. Its pre-tax profit rose 48.5%, from £136m in the same period last year to £202m in the current period.
Total revenue rose just 0.4%, from £8.80bn to £8.83bn, while group like-for-like (LFL) sales excluding-fuel and VAT was up 0.2% (2018/19: 4.9%). But the firm said its Q2 Group LFL ex-fuel/ex-VAT was down 1.9% (Q2 2018/19: up 6.3%).
It announced a special interim dividend of 2.00p, taking total interim dividend up 2.1% to 3.93p.
Morrisons said that sales comparatives were strong for the period, with 2018/19 assisted by very favourable summer weather and events such as the World Cup and royal wedding. It added: “In contrast, this year’s summer weather was largely unfavourable and there were no similar events to boost sales. Consumer confidence also continued to be weak, again affecting customer behaviour. In this more testing period, our profit performance was robust, free cash flow generation remained strong, and we were satisfied with our relative LFL performance.”
The supermarket giant said that during the second half, it was planning both for retail LFL to improve, and to implement “various additional cost saving opportunities.”
It has been operating a turnaround plan for the last few years, focusing on improving its wholesale business. This morning, it said it was on track to achieve its £1bn annualised wholesale supply sales target.
Its further £7m incremental profit from wholesale, services, interest and online in the period took the the total so far to £61m. Morrisons said it was on track for its £75m-£125m target
Morrisons also said it had now signed a multi-year partnership with Amazon to extend relationship in time and scope. It has also secured Harvest Energy as a new forecourt partner, LuLu as an export partner in the Middle East and commenced further convenience store trial formats with Rontec.
Morrisons added: “For retail, as guided at the time of our Q1 trading update, the market remained competitive and challenging throughout the first half. Customer behaviour continued to be impacted by the uncertainties around the prolonged Brexit process, and consumer confidence continued to be low. Very favourable summer weather last year became unfavourable this year, particularly in May and June, and there were no similar events to match last year’s boosts from the World Cup and royal wedding.
“We continued to invest in improving the shopping trip and becoming more competitive, especially for customers’ favourite items. We increased this investment during the first half, significantly reducing prices across hundreds of the Morrisons price list items and, while this is having a deflationary impact relative to the market, we have been pleased so far with the volume uplift of those items.
“For wholesale, the contribution to LFL growth fell during the first half as expected. During Q2, we passed the anniversary of last year’s accelerated wholesale supply roll-out to 1,300 McColl’s stores. In addition, as recently announced by McColl’s, it closed over 40 stores during its first half, which impacted our wholesale sales slightly.”
David Potts, Chief Executive, said: “We stayed focussed on our Fix, Rebuild and Grow strategy, and were pleased to maintain the momentum of the turnaround against strong comparatives last year. Sales and profit progress was robust, and we again invested in improving our competitiveness for customers.
“News today of new wholesale initiatives, including a further extension of our partnership with Amazon, and of another special dividend, again show how new Morrisons continues to become broader and stronger for all stakeholders, and how progress can be meaningful and sustainable even in more testing trading conditions. Such progress is only made possible by Morrisons exceptional team of food makers and shopkeepers.”
Andrew Higginson, Chairman, added: “I’m confident that Morrisons is on the right path for continued and sustainable growth. The team are listening and responding to customers, and making the right choices to benefit all stakeholders, including strong dividends for shareholders.”
